Landlord

BTL DSCR Calculator

Calculate Debt Service Coverage Ratio and Interest Coverage Ratio for BTL mortgages. Check if your rental income meets lender stress test requirements.

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About the BTL DSCR Calculator

What it does and how it helps you

The BTL DSCR Calculator helps UK landlords calculate Debt Service Coverage Ratio and Interest Coverage Ratio for buy-to-let mortgages. These critical metrics determine whether your rental income meets lender stress test requirements for BTL finance. Our calculator automatically applies the correct ICR requirement based on your ownership structure and tax status.

Calculate ICR at lender stress test rates
Automatic ICR requirement based on tax status
Show maximum borrowing for your rental income
Calculate required rent for any loan amount
Compare personal vs limited company requirements

How It Works

Understanding the calculation method

The DSCR and ICR calculations are essential for understanding buy-to-let mortgage affordability in the UK market.

What is Interest Coverage Ratio (ICR)?

ICR measures how many times your annual rental income covers the annual mortgage interest payment. The formula is:

ICR = (Annual Rent ÷ Annual Interest Payment) × 100

For example, if your annual rent is £18,000 and annual interest is £12,000, your ICR is 150% (18,000 ÷ 12,000 × 100).

UK Lender ICR Requirements

Most UK BTL lenders require minimum ICR of: - 125% for basic rate taxpayers and limited companies - 145% for higher rate (40%) and additional rate (45%) taxpayers

The higher requirement for higher rate taxpayers exists because of Section 24 tax changes, which restrict mortgage interest tax relief to basic rate only.

Stress Test Rate

Lenders don't use your actual mortgage rate for affordability. Instead, they calculate ICR using a "stress test rate" - typically 5.5% - to ensure you can still afford payments if rates rise. Some lenders use rates as high as 7-8%.

What is DSCR?

Debt Service Coverage Ratio is similar to ICR but uses net operating income (rent minus operating costs) rather than gross rent:

DSCR = Net Operating Income ÷ Annual Debt Service

For interest-only BTL mortgages, DSCR and ICR are essentially the same when using gross rent.

How the Calculator Works

1. Enter your property value and desired loan amount 2. Input the expected monthly rent 3. Select ownership type (personal or company) 4. If personal, select your tax status 5. Confirm the stress test rate (default 5.5%)

The calculator then shows: - Your ICR at the stress test rate - Whether you pass the lender requirement - Maximum loan amount at the required ICR - Monthly rent needed for your loan amount - DSCR and rent coverage multiple

When to use this calculator

Use this calculator before approaching BTL lenders to check if your rental income meets their requirements. Essential when purchasing BTL properties, remortgaging existing portfolio, or assessing whether a deal is financeable. Also useful for calculating maximum loan amounts or minimum rent needed for a specific loan.

Frequently Asked Questions

Common questions about this calculator

Most UK BTL lenders require 125% ICR for basic rate taxpayers and limited companies, or 145% for higher/additional rate taxpayers. Portfolio landlords (4+ mortgaged properties) typically need 145% regardless of tax status. The ICR is calculated at a stress test rate (usually 5.5%), not your actual mortgage rate. Some specialist lenders offer lower ICR requirements but usually at higher interest rates.
A DSCR of 1.25x (125%) or above is considered good for BTL, meaning rent covers debt service with 25% headroom. DSCR between 1.0-1.25x is marginal and may limit refinancing options. Below 1.0x means the property cannot cover its mortgage from rent alone. Aim for DSCR of 1.3-1.5x for comfortable margin and easier refinancing.
Stress testing protects both you and the lender against interest rate rises. Lenders typically stress test at 5.5% (1-2% above current rates) to ensure affordability if rates increase. Even if your actual rate is 4%, the lender calculates ICR at 5.5%. Some lenders use 7%+ for stress testing. This became standard after PRA regulations in 2017 following rate rise concerns.
Section 24 restricts mortgage interest tax relief for personal landlords to 20% (basic rate), even if you're a higher rate taxpayer. This effectively increases tax bills for higher rate taxpayers, which is why lenders require 145% ICR instead of 125%. Limited companies aren't affected by Section 24, maintaining 125% ICR requirement. Many landlords have incorporated for this reason.
Several options exist: (1) Reduce loan amount - lower borrowing means lower interest payments. (2) Increase deposit - same effect as reducing loan. (3) Find higher-yielding property - better rent-to-price ratio. (4) Use a limited company - qualifies for 125% instead of 145%. (5) Specialist lenders - some offer lower ICR at higher rates. (6) Top-slicing - some lenders use personal income to bridge the gap.

Related Property Terms

BTL DSCR calculator UKInterest Coverage Ratio BTLBuy-to-let affordability calculatorBTL mortgage stress testICR requirements UK 2024Rental income calculator BTLBTL lender requirementsSection 24 ICR impactPortfolio landlord ICRLimited company BTL calculator